Credit Unions Focus on Gen Y Relationship Building

Credit unions’ Gen Y-related challenges extend beyond grabbing their attention. Once a credit union gains young members, it has to convince them to stick around. Even after they’ve committed themselves, their impact on the credit union may not be 100% positive. Since many young adults lack expertise in personal finance, they’re a risky demographic to lend to.

As competition for Gen Y’s attention grows tougher, focusing on deepening young member relationships and helping them become a more financially sound group is key, several experts say.

One Gen Y relationship building strategy is to create a program that rewards young adult members as they increase their involvement with the credit union. In October last year, the $140 million, York, Pa.-based First Capital Federal Credit Union rolled out the Star Rewards program for members ages 26 and older, the credit union’s third age group-specific youth program.

Star Rewards program participants receive points based on their use of First Capital FCU products and services and their number of years as a member, and each month, they become eligible to receive perks based on the tier category that their total point tally falls into. For example, members in the three star tier category get a loan discount and a bump up rate on share certificates, the credit union said.

First Capital FCU also offers a program called Deep Sea Savers for members under 14 and a program called the Rock Star Super Savers for members ages 14 to 25. Both programs emphasize education and the importance of saving, and they’re unique to First Capital FCU, unlike the youth programs designed by third-party vendors and in use by multiple credit unions, explained Tara Houser, marketing director for First Capital FCU.

“The goal of our youth programs is to increase youth membership and participation and get them more comfortable with coming in here and more educated about their finances,” Houser said. “We want to be their first option when they start developing their spending habits as adults.”

Houser said the credit union launched the Star Rewards program to fully engage members as they develop their financial lives into their late 20s. The benefit for First Capital FCU, she said, is that it will hopefully secure its long-term future.

Considering the amount of time Gen Y members spend online, reaching out to them through a website and social media is an obvious move, but many credit unions are going beyond the basics when it comes to online outreach. That’s what Dallas-based company On Your Way, which provides a rewards-based web program for Gen Y, is helping more than 75 credit unions do, according On Your Way CEO Jared Cahill.

Each one of On Your Way’s credit union clients receives a company-branded website, including a link to a platform designed to drive interaction among Gen Y members and potential members. The platform provides access to financial literacy articles and blogs, contests, coupons and rewards. Visitors can then share the activities they initiate on the website through their own Facebook accounts, helping to create a buzz about what their credit union has to offer.

“Having a Facebook page is not enough,” Cahill said. “That’s only a single cylinder. At the core of our program is a social network and word of mouth marketing, which is what Gen Y bases their decisions on. You’ll get them interested and talking about you.”

An online, college-level personal finance course offered through the Rockville, Md.-based MoneyU is also available to On Your Way clients. The course, which is presented in a game format and takes participants through real-life financial decisions and tasks, is in use at high schools, colleges and several credit unions, including the $15 billion Pentagon Federal Credit Union in Alexandria, Va. The course can be offered, for example, as a prerequisite for struggling members prior to being accepted for a loan, said Cahill and MoneyU founder Kathy Griffin.

Cahill pointed out that while credit unions need to increase their young membership to survive in the future, the level of risk Gen Y presents can deter them from lending to the group.

“There’s an internal conflict, because they need young adults, but young adults can also drive their delinquency rates up,” he said. “They might think, we’re making money now, and we don’t want to stir the pot.”

To help turn young adults into a lower risk demographic, Cahill and Griffin said, credit unions must teach them concepts that they will apply outside of a classroom environment. The MoneyU program is based on the 100 most common disastrous financial mistakes young people make, features interactive calculators and widgets, and is designed to provide information that students will remember long after they complete the course, Griffin said.

“Our credit union partners say they love that the course allows them to connect with Gen Y and reduce the risks associated with Gen Y,” Griffin said. “They’re saying to their members, ‘We’ll help you out with your loan payments, but you have to take this course first.’ The course provides a knowledge that will stick with you. It makes very clear what will happen if you make a financial mistake.”

Aside from educating Gen Y and engaging them online, Cahill said credit unions need to offer products, services and technology features with young adults in mind.

“They need to do things that appeal to Gen Y and make them feel like they’re learning something,” he said. “They love to tweet, and they love to brag about how cool something is. It’s about promoting engaged interaction.”